Updated from 11:43 a.m. EDT with Tuesday market results and AK Steel forecast



) -- Shares of

U.S. Steel

(X) - Get Report

dropped on Tuesday after the company warned it expects profits to soften in the fourth quarter as North American and European economies continued to struggle.

The Pittsburgh-based company's shares closed Tuesday at $22.40, down 9.6%, on volume of 20.8 million, nearly double the issue's trailing three-month daily average churn of 11.5 million.

U.S. Steel's third-quarter adjusted net income was $118 million, or 72 cents a share, on revenue of $5.08 billion, which beat analysts' consensus forecast of a profit of 55 cents a share, and matched revenue outlooks.

"Our Flat-rolled segment made more than $200 million despite the challenges of a less than robust economy in North America," CEO John Surma said in a statement. "U.S. Steel Europe results continue to reflect the difficult economic situation in Europe, particularly in Southern Europe."

But the company said it expects European shipments and prices to dip in the fourth quarter of 2011 as market demand weakens as a result of troubled economic conditions in the region.

U.S. Steel also anticipates a drop in Flat-rolled prices and volume in the fourth quarter because of increasing domestic supply.

"We expect to report lower operating results in the fourth quarter for our North American Flat-rolled and European operations as a result of the slow and uneven economic recovery in those regions," Surma said.

Shares of

AK Steel

(AKS) - Get Report

plunged on Tuesday after the steel producer said it expects higher operating costs and lower spot market selling prices in the fourth quarter.

The stock dropped nearly 14% to close at $7.47 as investors dumped the stock on its dim outlook for the current three-month period.

"We anticipate lower average spot market selling prices and we expect higher operating costs," CEO James Wainscott said on a conference call, according to


. Wainscott said he was optimistic beyond the fourth quarter, because of gradual U.S. economic growth and a sustained spike in automotive demand and sales.

AK Steel beat bottom-line expectations for its fiscal third quarter but that wasn't enough to appease investors who are weary of a sector-wide deterioration.

"Despite the challenges of a sputtering economy and extraordinarily high raw material costs, AK Steel reported operating income for the quarter," said James L. Wainscott, "Challenging global economic conditions have created strong headwinds for our company and our country."

-- Written by Joe Deaux in New York.

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